Analysis

The Euro Is About Peace, Not Profits

What the Nobel Prize committee knows that Wall Street does not.

A statue of a globe painted with the EU flag and a peace dove stands in the garden of a church near the EU Council in Brussels, Friday, Oct. 12, 2012. The European Union won the Nobel Peace Prize on Friday for its efforts to promote peace and democracy in Europe, despite being in the midst of its biggest crisis since the bloc was created in the 1950s.(AP Photo/Geert Vanden Wijngaert)

The Nobel Peace Prize committee has not exactly covered itself in glory in recent years. In 2009 it awarded the prize to Barack Obama for simply being Not-Bush, even as the new president was hinting to the world (during his acceptance speech in Oslo, no less) that he was about to embark on a fierce killing campaign against Islamist bad guys. Now the committee has decided that the European Union, basically an entire continent—and a decidedly strife-torn one where enraged Greek protesters are comparing the current German government to the Nazis—is worthy of recognition for bringing peace to the world.

Is this foolish? Perhaps not. The Nobel committee usually has some kind of agenda in awarding this prize, and it has no less of one now. It seems to understand something that Wall Street and other financial markets that tend to bet against the survival of the euro currency do not: The struggle to preserve European unity and its principal bonding agent, the euro, is about far more than economics. The peace of the world may be on the line--the legacy of hell that Europe bequeathed to the world by being the birthplace of the worst wars in history. As the chairman of the Nobel committee, a noted Europhile and former Norwegian prime minister named Thorbjorn Jagland, said in announcing the award: “Everybody knows why the EU came, the awful background."

This “awful background” is really the raison d’etre for the 27-nation European Union and the 17-nation eurozone at the heart of it. The 1957 Treaty of Rome that created the EU, and the 1992 Maastricht Treaty that created the eurozone, may have been drily economic in their particulars, but the unspoken subtext was always unmistakably political: Europeans hadto unite, if only because continued disunity, or even a loose free trade zone, would keep them at the edge of the abyss. Two world wars, and scores of millions dead, were the ghosts in the monetary union's machine.

To put it more bluntly, everyone else in Europe (especially the French, the original architects of the European Union) wanted to be protected from the Germans, and even the Germans wanted to be protected from themselves, as then-Chancellor Helmut Kohl used to suggest publicly during the ‘90s debate over Maastricht. The German decision to support the European Monetary Union was also a quid pro quo with the French for permitting German reunification: If you allow us, the Germans, to be powerful again, we will hitch our future permanently and peacefully to a larger Europe. Kohl, who became one of the euro's most important champions, was strikingly direct about this. The question of a monetary union, he said repeatedly in the 1990s, was one of "war or peace."

Economically, the monetary union was a direct descendant of the seminal Coal and Steel Community of 1950 and the European Common Market that followed. But it was also conceived as a political Rubicon. EMU permanently and inextricably bound together nations that had once torn each other apart. It was a club you could join but not quit, and that was always intentional. The designers of Maastricht deliberately avoided an escape clause, thereby drawing a determined line between the future and the awful past.

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That question has now reemerged in a way no one thought possible a few years ago. As part of the global tremors of the 2008 financial crisis that are still being felt, the survival of the eurozone remains in doubt, and the risks are growing, the International Monetary Fund says in a new “global stability” report. “Although significant new efforts by European policymakers have allayed investors’ biggest fears, the euro area crisis remains the principal source of concern” in the world, the IMF said. “Capital flight and market fragmentation undermine the very foundations of the union: integrated markets and an effective common monetary policy.”

The major governments are all but paralyzed and continue to put off the true fix—a more effective fiscal union that would surrender another huge chunk of national sovereignty—and now the only person stepping into the breach is Mario Draghi, the head of the European Central Bank. After playing coy for months, Draghi recently defied the powerful German Bundesbank in announcing an unlimited bond-purchase program that should help stabilize the debt crisis in countries such as Italy and Spain, at least for now.

But this giant experiment in geopolitical engineering—the European Union—still faces an existential crisis, one that the entire world has little choice but to hope will be resolved in favor of peace. Economically, the eurozone probably should fail, but politically European leaders know they can't allow that to happen. And yet they must act. The EU has transformed most of Europe "from a continent of wars to a continent of peace," Jagland said in introducing the award. If the euro doesn’t survive, it is still possible that process could be reversed.